Question

Madsen Company reported the following information for 2020:

Sales revenue $2,040,000
Cost of goods sold 1,400,000
Operating expenses 220,000
Unrealized holding gain on available-for-sale debt securities 120,000
Cash dividends received on the securities 8,000
For 2020, Madsen would report other comprehensive income of
a. $428,000.
b. $420,000.
c. $128,000.
d. $120,000.

Answer 1

The other comprehensive income for Madsen Company in 2020 is $120,000, which comes from the unrealized holding gain on available-for-sale debt securities.

Step-by-step explanation:

To determine the other comprehensive income for Madsen Company, we must consider the elements that are not part of net income but are still part of comprehensive income. The unrealized holding gain on available-for-sale debt securities is a type of income that would be classified under other comprehensive income because it represents a change in fair value of the securities that isn't realized through an actual transaction.

In Madsen Company's case, the unrealized holding gain for 2020 is $120,000, as the cash dividends received on the securities are part of regular income and not other comprehensive income. Therefore, the correct answer to the question is d. $120,000.